At a crossroads about APG software? Here’s advice

By Dave Fee

Product Marketing Manager

3M Health Information Systems

Murray, UT

Question: Now that a prospective payment system (PPS) for hospital outpatient Medicare services has become law, should we immediately invest in the key ambulatory patient group (APG) software?

Answer: At this point, whatever we say with respect to what the Health Care Financing Administration (HCFA) will do with the APG payment methodology will be somewhat speculative. HCFA eventually will explain the regulations in detail. But we can draw some conclusions based on what we do know at this point.

Whether providers need to obtain the APG software in advance of the pending HCFA regulations depends to a great degree on several factors:

• how well-prepared the facility is in adapting quickly to the outpatient Medicare PPS;

• the facility’s size and affiliation with other providers in an integrated-system setting;

• the size of its Medicare patient business;

• the breadth and complexity of its outpatient services;

• how far along the facility has come in creating a sophisticated information system to integrate billing data from a multitude of outpatient departments.

In some cases, postponing the purchase of the APG software may be the correct decision. For example, some hospitals may not have a large Medicare population. But these facilities comprise a small segment of the market.

It should be emphasized that the role of the APG software extends far beyond the job of grouping sets of CPT-4 codes within prescribed APGs. As a management tool, the software gives administrators a structured information system, which enables facilities to process a huge volume of outpatient data from divergent clinical departments and information sources.

We do know that compared with the inpatient diagnosis-related groups (DRGs), the volume of outpatient data under the new PPS will be much larger and more complex. Hospitals in the past have found the task of handling outpatient data very difficult. Many hospitals do not permanently store their CPT-4 codes, and many aren’t prepared to handle the additional data elements in their systems that APGs will generate in a PPS. The sooner a facility starts preparing for these issues, the better off it will be. t

Question: How close will HCFA’s version be to the model of the APG system originally devised for the PPS?

Answer: HCFA has said that there will be changes made to the original model. But it doesn’t appear that the agency is planning any fundamental change to the core classification system.

The APG numbers may be different. The CPT-4 codes that go into them also may differ from the original devised when the regulation was first discussed by Congress. The extent of packaging and consolidation also might vary from the original. There has even been a suggestion that the term APG be dropped in describing the methodology itself.

Drastic APG changes not expected

Based on the information we currently know, the overall logic of the APG system appears to be consistent with the original. This is important for two reasons:

• An extensive body of industry knowledge about APGs already exists, and large numbers of professionals have been educated about the APG system. HCFA will not have to develop and invest in a major program of information distribution and re-education that would be necessary if a whole new outpatient PPS system were implemented.

• Existing APG software systems will undergo minor modifications upon release of the HCFA regulation but will not require major revisions. Knowing this, hospitals can make use of current APG software to begin preparing for the new outpatient PPS. This early preparation will help organizations avoid the crises and problems experienced in 1983 when DRGs were implemented before they were thoroughly understood. t

Question: How do we know what we’re buying today is what we’ll need tomorrow?

Answer: Every provider is going to have some unique need for the APG software. Hospitals are becoming large, integrated systems. Their capacity for information will undoubtedly change over time. One should expect modifications in complying with evolving regulatory policies. Therefore, it’s important to look at information systems from a holistic perspective.

For most hospitals, focusing on the outpatient side poses a major challenge. Questions providers should raise in buying APG software from a technology vendor must include:

• How strong is the vendor’s commitment to ensuring that the product conforms to regulatory policy?

• How extensive is the company’s technical support program?

• How sufficient is the company’s experience in working with regulatory compliance issues?

• Is the vendor willing to put its level of commitment in writing?

When HCFA finally publishes its regulations, a reliable technology vendor should be there to keep up with the changes on behalf of the customer. One way to obtain this commitment is to include something in the purchase contract. It will ensure that the software being purchased will be maintained by the vendor and will be consistently upgraded to comply with revised regulations.

(Editor’s note: For more information on APGs, see Same-Day Surgery, October 1997, pp. 124-125.)